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UNCTAD: Mixed Economic Fortunes Await China With WTO Accession

Jan 13, 2005

By Agence France-Presse China is likely to have a hard time adapting its state-run industries and agriculture as its new liberalized trading relations with the outside world take hold, a United Nations report released on April 29 said. The U.N. Conference on Trade and Development's (UNCTAD) annual report also indicated that concerns China might flood world markets with cheap exports after accession to the World Trade Organization (WTO), because of its huge, low wage workforce, were exaggerated. "The nature of China's export industry and market access conditions for labor-intensive [manufactured goods] set some limits to the gains that it could reap from accession," the report said, adding that China also suffered from low productivity rates. While it underlined that possible job losses in some Chinese industries would eventually be compensated by expansion in other sectors, the report voiced fears about the specific impact of liberalization on employment in state-run companies. UNCTAD estimated that Chinese state companies employ 83 million people, generating 38% of national income and about half of exports, and indicated that they were largely inefficient. "State-operated enterprises likely to be the worst affected by accession operate in industries such as machinery, electrical equipment, smelting and processing of metals, textiles, chemicals and chemical fibers, transport equipment, non-metal mineral products and food processing," the report said. These account for about 72% of jobs in state enterprises, according to UNCTAD. However, in a series of statistical simulations, it estimated that accession could have a positive impact on output and employment in sectors such as clothing, electrical equipment, and some food products, but warned of the "severe" impact of a likely increase in imports of agricultural goods, textiles and motor vehicles. UNCTAD said second-tier newly industrialized East Asian economies and some Latin American emerging markets such as Mexico would face the stiffest competition from China. But it expected a surge in opportunities for a broad range of products on the Chinese market, mainly middle-range goods such as textiles, machinery and motor vehicles. Those would primarily benefit other countries -- mainly imports from industrialized countries and top Asian economies -- while some African and Latin American countries would find more demand for commodities from the Asian giant. Copyright Agence France-Presse, 2002